The Economic Impact of Donald Trump’s Policies: Wall Street’s Growing Concerns
Uncertainty and Volatility on Wall Street
Wall Street is increasingly alarmed by the economic impact of Donald Trump’s decisions and the perceived inconstancy in the announcements from the White House. The latest twist in the saga of customs duties, where exemptions were granted for Canadian and Mexican products, has left investors bewildered. This follows a series of announcements, including a 25% surcharge, spreading the tariffs to automobiles, and hinting at no further exemptions. The rapid reversals have started to look like sterile improvisation rather than a coherent strategy.
Investors can adapt to many changes, but they struggle with increased uncertainty. The S&P 500 has dropped 2.4% since January 1, erasing the gains made since Trump’s election victory on November 5. This drop is a clear indicator of the market’s growing doubts about the impact of the White House’s aggressive social, commercial, and geopolitical policies.
The "Trump Put" and Market Sentiment
American financiers are now worried about the potential for a "perfect storm" of economic slowdown, unemployment, and high inflation. Wall Street believes that Trump is keeping an eye on his political career, as too much volatility could undermine confidence, erode the American heritage, and degrade his image as a winner. Some even speculate that Trump adjusts his declarations based on market developments, though he denies this.
Major American business banks have integrated a "Trump Put" into their strategies—a floor level of the S&P 500 from which they expect the president to influence his policy to prevent financial market derailment. However, the exact level of this "Trump Put" remains a mystery.
Market Reactions and Sector Performance
The session of the previous day almost turned into a rout on Wall Street. Defensive sectors, such as telecom (Verizon +3.2%), health insurers (UnitedHealth +2.5%), and food (McDonald’s +1%), saw gains as investors sought stability. Conversely, the technology sector took a hit, with the Nasdaq 100 dropping 2.8% and losing 9.8% since its February 19 record. Companies like Nvidia and Tesla have seen significant losses, though Broadcom’s strong earnings report provided some comfort.
The banking sector, which had been performing well, also paid a heavy price due to the deteriorating economic context. Financial values do not fare well in times of uncertainty.
Geopolitical and Economic Factors
Among the elements that could divert attention from the trade war is the prospect of a diplomatic solution to the war in Ukraine. Representatives from Washington and Kyiv are set to meet, with the U.S. insisting on an economic agreement on Ukraine’s natural resources in exchange for support.
The Federal Reserve also has a role to play. The turmoil caused by Trump’s policies may lead to more pronounced monetary easing than expected. Christopher Waller, a member of the Fed’s Board of Governors, hinted at two to three rate decreases by the end of 2025, though he does not see a rate drop in March. Jerome Powell’s speech later in the day is eagerly awaited for further insights.
Global Market Reactions
In Pacific Asia, the decline dominated, with Tokyo dropping more than 2% and Sydney 1.8%. Taiwan and South Korea, buoyed by Broadcom’s strong performance, limited their losses to 0.5%. China saw a moderate drop, while India remained balanced. European markets are expected to open in bright decrease, reflecting increased volatility.
Key Economic Indicators and Recommendations
Today’s economic highlights include German factory orders, the balance of current accounts and trade balance in France, and U.S. employment figures. The employment data, to be released at 2:30 PM, will be crucial for market forecasters.
Stock Recommendations
| Company | Recommendation | Price Target |
|---|---|---|
| Accor | Overweight | 54 to 58.50 EUR |
| Air France-KLM | Underweight | 5.35 to 8.50 EUR |
| Akzo Nobel | Buy | 57 to 75 EUR |
| Antin Infrastructure Partners | Neutral | 12.60 to 12.90 EUR |
| Bachem Holding | Keep | 75 to 65 CHF |
| Portuguese Commercial Bank | Overweight | 0.69 EUR |
| BNP Paribas | Market Weight | 80 to 90 EUR |
| Bonduel | Neutral | 7.20 to 7.80 EUR |
| Clas Ohlson | Sell | 206 SEK to 220 SEK |
| Comet Holding | Keep | 280 to 270 CHF |
| Crédit Agricole | Market Weight | 17 to 19 EUR |
| DHL Group | Buy | 36 EUR to 50 EUR |
| Engie | Keep | 17.30 to 18.10 EUR |
| Eurobank Ergasias Services | Overweight | 2.77 to 3.18 EUR |
| Eutelsat | Sell | 6.70 EUR |
| Galderma Group | Buy | 123 to 121 CHF |
| Geberit | Underweight | 500 to 515 CHF |
| Jcdecaux | Neutral | 17 to 20 EUR |
| Julius Carries | Market Weight | 59 to 67 CHF |
| KBC Group | Overweight | 91 to 100 EUR |
| Kuehne and Nagel International | Buy | 315 to 270 CHF |
| The French Games | Neutral | 38.50 to 36.50 EUR |
| Logitech International | Buy | 101 to 104 CHF |
| Pernod Ricard | Buy | 135 to 128 EUR |
| Piraeus Financial | Overweight | 4.96 to 6.14 EUR |
| Rémy Cointreau | Buy | 100 to 95 EUR |
| Scor | Accumulate | 29.40 to 30.60 EUR |
| Société Générale | Overweight | 44 to 51 EUR |
| Spie | Outperformance | 40.50 to 48 EUR |
| Stellantis | Keep | 13 USD |
| Technip Energies | Buy | 27.50 to 33 EUR |
| Teleperformance | Overperformance | 173 to 160 EUR |
| Total Energy | Preserve | 60 to 62 EUR |
| Universal Music Group | Buy | 26 to 30 EUR |
| VAT Group | Buy | 490 to 500 CHF |
| Whitbread | Neutral | 4,400 GBX to 3000 GBX |
Global Economic Highlights
Europe
- Universal Music Group announced an adjusted EBITDA of €799 million for Q4 2024.
- Salvatore Ferragamo reported a loss in 2024.
- Bayer plans to withdraw from Roundup due to legal risks in the U.S.
- Lloyds Banking Group is transferring qualified computer jobs from the UK to India.
- ThyssenKrupp is removing 1,800 jobs in its automotive division.
- Zalando is close to acquiring its competitor About You.
North America
- The Gap and Broadcom saw significant post-session gains, while Hewlett Packard Enterprise and Costco saw declines.
- Sycamore is buying back Walgreens Boots for $23.7 billion.
- Play-tardidal supply is considering selling its American stores.
- Johnson & Johnson is discontinuing advanced phase studies of an experimental medication for major depressive disorders.
- Meta plans to introduce improved vocal functions in its latest Open Source Language model, Llama 4.
- ServiceNow is transferring its headquarters to Palm Beach.
- Microsoft will invest $298 million in AI in South Africa.
Pacific Asia
- Nissan will discuss potential successors to the CEO.
- Toyota is launching its cheapest smart EV in China.
- Samsung Electronics is looking for an official with links to Trump.
- SBI denies negotiating with SK Hynix and United Microelectronics for a chip manufacturing plant in Japan.
FAQ Section
Q: How are Trump’s policies affecting Wall Street?
A: Trump’s policies have introduced significant uncertainty, leading to a 2.4% drop in the S&P 500 since January 1. Investors are concerned about potential economic slowdown, unemployment, and high inflation.
Q: What is the "Trump Put"?
A: The "Trump Put" is a strategic level of the S&P 500 where major American business banks expect the president to influence his policy to prevent financial market derailment.
Q: Which sectors are performing well amidst the uncertainty?
A: Defensive sectors like telecom, health insurers, and food are performing well as investors seek stability. The technology sector, however, has seen significant losses.
Q: What are the key economic indicators to watch?
A: Key indicators include German factory orders, the balance of current accounts and trade balance in France, and U.S. employment figures.
Did You Know?
Donald Trump’s policies have led to the integration of a "Trump Put" into the strategies of major American business banks. This is a floor level of the S&P 500 from which they expect the president to influence his policy to prevent financial market derailment.
Pro Tip
Investors should keep an eye on Jerome Powell’s speeches and the Federal Reserve’s actions, as they play a crucial role in shaping the economic landscape amidst Trump’s policies.
Reader Question
What do you think will be the next major economic indicator to watch in the coming months? Share your thoughts in the comments below!